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Light at the End of the Tunnel

Legal sports betting in the U.S. is now on the radar. When is it likely to see some action?

Light at the End of the Tunnel

Like the Christmas Eve Justice Department ruling on the legality of online gaming, the November op-ed piece penned by National Basketball Association Commissioner Adam Silver in the New York Times came without fanfare and no warning. But the impact on the possibility of legal sports betting in the U.S. could not have been greater.

Sports betting has always been the weak sister in the U.S. to iGaming or online poker. It is often the third rail of wagering in the U.S., always engendering passionate and costly opposition from the major sports leagues and the NCAA. Just look at Delaware when that state decided to “opt in” on its exemption to 1992’s Professional and Amateur Sports Protection Act. The Delaware move was challenged by the sports leagues from the start, and even when it was approved, the leagues continued the challenge, winning a court decision that limited Delaware bets only to the NFL and to parlay bets, exactly what the lottery offered prior to PASPA.

So the expensive sports books built by the Delaware casinos go virtually unused a majority of the year, and the lucrative football betting is limited to the admittedly inferior parlay experience.

New Jersey has also take the full brunt of the major league opposition. After a “Don Quixote” moment for state Senator Ray Lesniak, who faced down the leagues on his own, state government picked up the ball under Governor Chris Christie and challenged PAPSA on constitutional grounds. The major sports leagues brought their firepower to bear and won the first two skirmishes. The Third Circuit Court now has the case, and the leagues continue their opposition.

Silver Lining

Despite being a party in the case against New Jersey, Silver has double downed recently on his op-ed piece. Appearing on the Boomer & Carton radio show in New York, Silver said gambling is “good” for his league.

“Putting aside whether or not we’re actually actively involved in any of the betting, it creates more engagement,” he says. “We all know as fans if you have, even, like a gentleman’s bet or a $5 bet with your friend on a game, all of a sudden you’re a lot more interested.”

Joe Asher, the CEO of William Hill U.S., says Silver’s pronouncements have made a big difference in the national perspective.

“That (op-ed) piece completely changed the dynamic around the issue,” Asher says. “He didn’t wake up one morning and decide to write this. There clearly was a lot of thought, deliberation and knowledge that went into this. They clearly understand the nuances. That was apparent not only in the op-ed but also in the subsequent comments that the commissioner has made and continues to make.”

Silver (and others) have pointed out that sports betting in the U.S.—legal and illegal—is a $300 billion to $400 billion industry. Asher says the strategy of the federal government must change.

“The current policy on sports betting has failed,” he asserts. “You have this massive black market all around the country. The only place it’s legal is Nevada, Delaware and Montana. Outside of those states, all the money is going to criminals. And whose interest does that serve? Certainly not the interests of the leagues; it does nothing to protect the integrity of their games. It does nothing to promote job growth or create tax revenue, and it definitely does not protect the customers. Something needs to be done to fix that.”

Lee Amaitis, CEO of CG Technology (formerly Cantor Gaming) believes that the New Jersey lawsuit may succeed, but otherwise there needs to be strategy the industry embraces to move the ball forward.

“Legally, all eyes are focused on New Jersey,” he says. “Legislatively, the American Gaming Association is setting up committees to study it. There’s a federal law that says we can’t offer wagering outside of the states where it already exists. So do we pass a law that says we can, or do we repeal the law that says we can’t and let sports gaming evolve into the states that want it?”

Asher also believes the challenge from New Jersey could succeed.

“The decision in the New Jersey challenge to PASPA in Circuit Court was 2-1 (on a three-judge panel). It’s not hard to conclude that you may get a different decision before a different group of judges,” he says.

Asher agrees that sports betting is a states’ rights issue, and the matter should be left to the states.

“If New Jersey wants to have sports betting and Utah doesn’t, that’s OK,” says Asher, who believes each state should be able to make its own decision.

Since Silver’s op-ed and subsequent comments, U.S. Senator John McCain (R-Arizona) has said that Congress should take another look at sports betting.

“We need a debate in Congress,” McCain told ESPN. “We need to have a talk with the American people, and we need to probably have hearings in Congress on the whole issue so we can build consensus.”

McCain, who once tried to outlaw betting on amateur sports even in states where it is legal, seems to have been swayed by the amount of money bet illegally in the U.S.

“I think that there are places for sports gambling in states, where gambling is legal,” McCain said. “We obviously know that there are huge amounts gambled on sporting events, particularly football.”

Phil Katsaros is head of business development in the Americas for Inspired Gaming, a British company that specializes in gaming content and sports-betting systems. He believes the experience in Nevada should convince naysayers.

“Just look at Nevada, the most notable exception to the prohibition on sports wagering,” he says. “It’s a $4 billion sports betting market with an adult population of around 2 million. Now obviously, visitors come from all across America and abroad to gamble there, but they do so because first they want to gamble, but so they can do so in a safe, legal and regulated setting, while raising millions in tax revenue for the state. Nevada only scratches the surface in terms of sports wagering. Most experts estimate the total U.S. market is at around $400 billion. That’s a lot of illegal, unregulated and untaxed sports wagering dollars.”

Testing Technology

The rapidly developing sports betting technology is now in use in other jurisdictions. Amaitis believes that states considering the legalization of sports betting need to follow the examples already set.

“The European model has been extremely successful,” he says. “It’s legal and regulated in many jurisdictions. To my knowledge in the current structure in the E.U., they let individual countries run their sports wagering business. The exact same model could be used in the U.S.”

In Nevada, where mobile sports betting has been legal for several years, Amaitis says the results have been amazing.

“When legalizing sports wagering in the U.S., it’s wise to look at who has the best technology rather than just setting up betting shops and hoping it works. That’s not the way to go,” he insists. “Nevada has successful, advanced sports wagering platforms. Since we introduced our technology in Nevada, the state handle has increased from $2.2 billion to $3.9 billion. That’s clearly because of account wagering and technology.”

Asher says William Hill has taken its European experience and improved it in Nevada.

“We know how to run sports books,” he says. “We have tremendous economies of scale. You can’t compete with us on the scope of product. We have in-play wagering on all the major sports. You can’t offer that scope of products without the benefits of economies of scale.”

In-play or in-running betting—wagering on the outcome of events while the game is being played—has been a tremendous success in Europe and is catching on in the U.S., says Asher.

“It’s grown significantly. I think it will be 20 percent to 25 percent of our revenues by the end of the year.”

CG Technologies was the first to offer the wager in the U.S., and Amaitis says it is still evolving.

“We were ahead of the curve with in-running,” he says. “The huge appetite on pre-gaming betting in the U.S. has taken away from in-running. Most people’s betting bankroll is focused on the pre-game. And there’s so much to bet on. There’s a small part of the year when the four major sports overlap, and there are other parts of the year where big things are happening in multiple sports, which takes away from in-running.”

But CG Technology is pressing ahead.

“You’ll see a new in-running product from CGT in the fall, just in time for football season,” says Amaitis. “It will be different categories and different kinds of bets. It’s a big investment for us, and it’s a technology-driven investment.”

Asher says in-play betting keeps people interested in what might normally be a boring game.

“I went to an NBA game in London in January, Bucks versus the Knicks,” he says. “It wasn’t a particularly competitive game, but the guy sitting next to me was betting in play as well. It keeps people engaged in the game even when the outcome is largely decided.”

Fantasy Man

No doubt the rise of fantasy sports has increased the interest in sports betting. With millions of dollars in marketing for the two top sites for daily fantasy wagers on TV non-stop, some question whether it’s just sports betting in different clothes.

“Look,” says Asher. “They have a line in their commercials saying this is not gambling. That’s nonsense. Of course it’s gambling. You’re risking something of value (money) on something with an uncertain outcome. That’s the definition of gambling.”

But the legality of daily fantasy sports is a bit hazy, even though a waiver was given in the Unlawful Internet Gambling Enforcement Act of 2006.

“Just because it’s gambling doesn’t mean it’s legal or illegal,” Asher says. “But that’s a separate issue. Even if you accept the argument that it’s skill-based, you still have those issues about whether it’s legal or not.”

He doesn’t buy the argument that it’s a legal alternative to sports betting.

“The average player doesn’t really care,” says Asher. “We may care if it’s legal or not; the leagues may, but he doesn’t. He just wants to get a bet down.

“We’ll see if some attorney general will take some enforcement action. Poker was widespread and folks said there’s never been a prosecution. Yet one day, the domain gets seized and all the accounts are closed. We’ll see if that happens with DFS.”

When it first launched mobile betting in Nevada, CG Technology had a fantasy aspect to its betting choices, where the player would choose a specific number of players and bet against the house and other players. Amaitis says it spread his company too thin.

“We took the position that we wanted to add fantasy for real money in Nevada,” he says. “We put our toe in the water to see what happened. But we soon realized that our focus had to go on real-money sports wagering, and building the best app, the best account wagering system and the best technology for our customers to help them grow their business. We’ll leave fantasy to those who do it best.”

While Inspired doesn’t have a specific fantasy product, the company offers “Virtual Sports,” a compilation of data and content that give players the opportunity to wager on sporting events that don’t actually happen in real life. Katsaros explains how this works:

“Virtual Sports have become a proven category of sports wagering, enjoyed by millions of players across the globe, driving structured, incremental growth for operators,” he says. “The added beauty of Inspired’s Virtuals is that they suit all different types of players—from betting novices who want to pick a lucky number or name, to sports betting enthusiasts who place more complex parlay and proposition bets.”

Katsaros says the Nevada Gaming Control Board is formulating regulations that would allow casinos and sports books in the state to offer the virtual games.


Betting on Timing

None of the sources interviewed for this article were willing to speculate about when sports betting may be legalized. Most want to see a resolution of the New Jersey challenge, but believe that the fact it’s being discussed on a regular basis is good news.

Amaitis says he’s constantly seeing press reports on the issue. “The topic of legalizing sports wagering used to come up every three to six months; now it comes up almost every day,” he says.

Asher says it will take the cooperation of the major sports leagues to make an impact.

“(Baseball commissioner) Rob Manfred wants to take a look at the issue. I won’t suggest where they might come out. He works for 32 owners and we’ll see what they decide,” says Asher.

Katsaros says once public officials look at the experience in Europe, and more importantly, in Nevada, there should be some movement.

“It’s impossible to predict when and how legalization will occur,” he says. “Obviously, there is an excellent example with Nevada. If, and when, legalization efforts progress, and I assume it’s only a matter of ‘when,’ Nevada should be ground zero in understanding how U.S. markets could regulate wagering.”

——————————————————————————————————–

What Say the Sports?

Adam Silver, the commissioner of the National Basketball Association, started the ball rolling toward legalized sports betting in the U.S. with an op-ed column in the New York Times on November 13. Silver wrote, “The laws on sports betting should be changed. Congress should adopt a federal framework that allows states to authorize betting on professional sports, subject to strict regulatory requirements and technological safeguards.

“These requirements would include: mandatory monitoring and reporting of unusual betting-line movements; a licensing protocol to ensure betting operators are legitimate; minimum-age verification measures; geo-blocking technology to ensure betting is available only where it is legal; mechanisms to identify and exclude people with gambling problems; and education about responsible gaming.”

While none of the other sports commissioners were as supportive as Silver, the only one who isn’t considering changing his position is in charge of the most powerful sport in America.

Major League Baseball Commissioner Rob Manfred
“Gambling in terms of our society has changed its presence on legalization, and I think it’s important for there to be a conversation between me and the owners about what our institutional position will be.”

National Hockey League Commissioner Gary Bettman
“I think there needs some attention to be paid to what sport is going to represent to young people. Should it be viewed in the competitive team-oriented sense that it is now, or does it become a vehicle for betting, which may in effect change the atmosphere in the stadiums and the arenas?”

National Football League Commissioner Roger Goodell
“We oppose sports gambling. We haven’t changed our position on that, and I don’t see us changing our position on that.”

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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